A-REIT Survey 2018

BDO’s 2018 A-REIT Survey reveals a rebound for Australian REITs following an e-commerce boom.

Now in its 24th year, the survey ranks the S&P/ASX 200 A-REIT Index trusts based on key financial and investment indicators in the 12 months to 30 June each year.

Over the 2017/18 financial year, Australian Real Estate Investment Trusts (A-REITs) who own and manage industrial assets were the best performers. Industrial REITs showed a 26% total return over the 12-month period to June 2018, with big performances from Centuria, Industria, Charter Hall Group, and National Storage, all ranking in the top 10 of this year’s survey.

Online shopping accounts for over $23 billion annually in Australia, and the reliance and need for warehouse space is at an all-time high, driven by advancements in the e-commerce sector. Retailers rely on supply-chain efficiency to deliver goods with speed, and this has had a big effect on the industrial property market which has spilt-over into demand for the Industrial REITs.

The same e-commerce trends continue in the retail sector, with a healthy 14.1% return. Flagship assets and those weighed towards non-discretionary retail had strong reporting seasons as they diversify and differentiate from the online market.

The pub sector continues to perform well with ALE Property Group coming in at number one in the survey, up from second place last year and in the top three for the fourth consecutive year. In the office market, assets in the Sydney and Melbourne markets are benefiting from high occupancy rates and stable income.

The end of the year saw significant asset revaluations which capped off a 2018 where Net Tangible Assets (NTA) per share values increased 9.7% on previous year. The strongest revaluations were in the commercial and industrial sectors.

Gearing remains stable for the AREIT sector, a constant theme in recent years. AREITs with lower gearing are trading at higher premiums to NTA and sector average gearing was 25.9% in 2018.

Looking ahead, despite some macro challenges, with the underlying metrics of sustainable income, occupancy and asset values remaining positive, AREITs remain well placed as the go-to defensive asset for investors.